Why the Bottom Fell Out of Six Flags Shares

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of thrill-ride provider Six Flags (NYS: SIX) were leaving investors feeling queasy today, falling as much as 15% after a subpar earnings report.

So what: Revenues of $485 million in the all-important third quarter fell well short of expectations of $514 million, growing just 2% from the year ago. As the amusement-park business is highly seasonal and dependent on the warm summer months, that miss was especially painful. Six Flags does about half of its sales in the third quarter. Cash earnings per share were up slightly for the quarter from $4.12 to $4.33, while GAAP EPS were distorted to its divestment from Dick Clark Productions. The theme-park chain also increased its quarterly dividend 50% to $0.90 per share, giving it a 6.3% dividend yield after today's pullback.

Now what: Shares have doubled over the past year, but after the dividend increase, they look like they could be a good buy. Based on the company's cash earnings over the past year, its P/E is about 14. Sluggish growth is a concern, but a number of rides set for 2013 indicate plenty of optimism about the future. More than $1 billion in tax loss carry forwards also gives the company an advantage in the near future.

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